Cocoa Prices Slide as Demand Concerns Mount
March ICE NY cocoa (CCH25) closed at -143 (-1.40%) on Thursday, while March ICE London cocoa #7 (CAH25) ended down -148 (-1.83%).
Market Reactions Driven by Cocoa Demand Warnings
Cocoa prices fell to a weekly low on Thursday, influenced by comments from Mondelez executives on Tuesday. They indicated that chocolate prices might soar by as much as 50% due to rising cocoa costs, which are likely to dampen chocolate demand.
Impact of Currency Strength on Pricing
Additionally, Thursday’s surge in the British pound (^GBPUSD) to a two-month high put further pressure on London cocoa prices. A stronger pound makes cocoa, priced in sterling, more expensive for buyers.
Cocoa Demand Trends and Manufacturer Adjustments
Concerns about lagging cocoa demand have also surfaced. On February 6, Hershey announced that elevated cocoa prices are compelling the company to change its recipes by substituting cocoa with other ingredients. Mondelez International’s CFO, Zarmella, highlighted a potential decrease in chocolate consumption, particularly in North America, in statements made on February 4.
Export Volatility and Inventory Levels
While decreasing exports from the Ivory Coast could support cocoa prices, recent data showed 1.34 MMT of cocoa has been exported to ports from October 1 to February 16, marking a 20% increase from the previous year. However, this growth rate has slowed compared to the 35% rise reported in December.
Ongoing Inventory Challenges and Price Predictions
Global cocoa supplies present a mixed picture. ICE-monitored cocoa inventories in U.S. ports have been decreasing for the past 18 months, hitting a 21-year low of 1,263,493 bags on January 24. As of Thursday, inventories showed a recovery to 1,403,993 bags.
Grind Report Highlights and Future Deficits
The high cocoa prices have noticeably diminished demand in the last quarter, as indicated by quarterly grinding reports. The European Cocoa Association reported a 5.3% year-on-year decline in Q4 grindings to 331,853 MT, the lowest level in over four years. Similarly, cocoa grindings in Asia and North America dropped by 0.5% and 1.2% respectively during the same period.
Global Cocoa Deficit Forecasts
On a positive note for prices, the International Cocoa Association (ICCO) elevated its estimate for the global cocoa deficit for the 2023/24 season to -478,000 MT—up from -462,000 MT in May—marking the most significant deficit in over six decades. In addition, ICCO revised its global cocoa production forecast down to 4.380 MMT from 4.461 MMT previously, representing a 13.1% year-on-year decrease, along with a projected stocks-to-grindings ratio of 27.0%, the lowest in 46 years.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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